California Green City Backers Advance Landowner Legal Fight *Centurion Insurance AFS*

A company that bought property for a group of tech billionaires trying to build a sustainable city in northern California won a ruling advancing its lawsuit that accused landowners in the project’s target area of a conspiracy to drive up prices.

A federal judge in Sacramento denied a request by landowners to dismiss the suit by Flannery Associates LLC, the company behind the California Forever project, which carried out a multiyear secret land-buying spree in a semi-rural county northeast of San Francisco and ultimately acquired scores of parcels totaling about 62,000 acres.

Flannery said in November that it had acquired all the land it needs to create a walkable, green community in Solano County that the project’s backers say would generate thousands of jobs.

In January, Jan Sramek, founder and chief executive officer of California Forever, the development company backed by the Silicon Valley investor group, unveiled a ballot measure asking Solano County residents to approve changes to zoning regulations from the 1980s that limit development outside of existing cities.

If the measure qualifies for the ballot and passes in November, Sramek and his supporters have said, it will help California realize the interconnected goals of adding affordable and climate-friendly housing.

The project is backed by tech moguls like former Sequoia Capital Chairman Mike Moritz, LinkedIn co-founder Reid Hoffman and venture capitalist Marc Andreessen. They invested more than $900 million, which Sramek used to discreetly buy land for the project, which was first publicized in late August by the media.

The plan has since faced fierce criticism from local officials and residents who’ve raised concerns about its impact on the environment and local agricultural economy and security around nearby Travis Air Force Base.

In the lawsuit, Flannery sought more than $500 million in damages from a group of local landowners, alleging they colluded to overcharge the company as it attempted to buy property.

Flannery claimed that some of the “conspirators” paid between $470-$2,800 an acre for their properties, but weren’t satisfied when Flannery offered $15,000 an acre. Instead, “they countered Flannery’s offers by demanding even higher payments,” according to the complaint.

Several families named as defendants later reached settlements with Flannery.

Lawyers for the remaining landowners countered that federal antitrust law doesn’t apply to individual landowners’ sales of real estate. They also alleged that Flannery used unfair and “strong-armed” tactics to force farmers to sell their land, including pitting family members against each other.

Without deciding the merits of the case, US District Judge Troy Nunley concluded in a March 29 ruling that Flannery sufficiently alleged that some landowners engaged in an illegal agreement to only sell their properties at supracompetitive prices, which caused Flannery to overpay for certain properties or not be able to purchase other properties.

The judge said the suit can move forward over allegations that the landowners shared confidential information with each other about Flannery’s negotiation tactics.

While the landowners are “correct that there is nothing illegal about neighbors discussing how much they sold their property for, it is also true that ‘the exchange of price information alone can be sufficient to establish combination or conspiracy,’” he wrote.

Representatives of California Forever declined to comment on the ruling. Lawyers for the landowners didn’t immediately respond to a request for comment.

Copyright 2024 Bloomberg.

Topics
California